Survey finds state economies weakening fast

By Robert Tanner, The Associated Press
Friday November 02, 2001



A 50-state survey conducted over the last two weeks confirms the latest economic worries: state revenues are down, budget cuts are needed, and strains on government services are worsening. 

Adding to the gloom, the results don’t fully capture the economic damage following September’s terrorist attacks, the National Conference of State Legislatures said in the report released Thursday. 

“Policy-makers are bracing for the worst,” said Corina Eckl, one of the report’s authors. “What they’ve seen for the first few months is pretty bad...But the real question is how long and how deep this downturn is going to be.” 

The report said it found the “harshest fiscal conditions in a decade.” At the Federation of Tax Administrators, a group that monitors state economies, Executive Director Harley Duncan said 20 years might be more on target. 

The aftermath of the Sept. 11 attacks adds a great deal of uncertainty to the fiscal outlook. “We really don’t have any experience with this kind of economic shock,” Eckl said. “This is new ground.” 

The conference contacted legislative fiscal directors in every state, trying to gauge the substantive ways states’ economies weakened in July, August and September — the first three months of most states’ fiscal years. A report a few months ago documented the softening that began last winter. 

The new report found: 

—Revenue growth continues to fall, with 44 states reporting their already scaled-back hopes were set too high. 

—Costs rose faster than expected, too, with 19 states reporting they were spending faster than their budgets anticipated, and an additional seven expecting overruns in some programs. Higher Medicaid costs were a big worry for many. 

—Budget cuts were passed or on the table in 28 states. 

That meant nearly $1 billion in cuts in Michigan; in Florida, lawmakers approved $800 million in cuts, a half-billion less than the shortfall. In Utah, the governor and lawmakers are squabbling over how to cover a $177 million shortfall. 

Colorado and Missouri both ordered widespread cuts to government programs, but spared K-12 education. In Idaho, education was cut, though not as deeply as other programs. 

Many states were worried that job losses would add to government demand for unemployment, welfare and Medicaid. 

A very few positive spots remained: Louisiana, Montana and Texas benefited from energy-related taxes. Alabama, Nevada and New Hampshire reported revenues in line with or above projections. 

To add to the overall worry, the new data didn’t reflect sales tax returns since Sept. 11 for most states — an important source of government funds for 45 states, and one that is very sensitive to weaker consumer confidence. 

“As more collection figures become available — especially post Sept. 11 data — the revenue picture is expected to get worse,” the report said. “Many states are waiting to see the effects of declining consumer confidence, widespread layoffs and corporate downsizing on state coffers.” 

Duncan, who before joining the tax administrators’ group worked on state finances in Kansas and South Dakota, said he hadn’t seen the new NCSL report, but it confirmed the other data he’d seen. 

And, he said, “the pace of deterioration that occurred between Sept. 11 and now — I’ve never seen anything go that far and that fast.” 


On the Net: 

National Conferences of State Legislatures: http://www.ncsl.org